Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
bartleby

Videos

Textbook Question
Book Icon
Chapter 4, Problem 14P

Comprehensive: Balance Sheet, Schedules, and Notes The following is an alphabetical listing of Stone Boat Company’s balances sheet accounts and account balances on December 31, 2019:

Chapter 4, Problem 14P, Comprehensive: Balance Sheet, Schedules, and Notes The following is an alphabetical listing of Stone , example  1

Additional information:

  1. 1. The company reports on the balance sheet the net book value of property and equipment and long-term liabilities (known as control accounts). The related details are disclosed in the notes.
  2. 2. The straight-line method is used to depreciate property and equipment based upon cost, estimated residual value, and estimated life. The costs of the assets in this account are: land, $29,500; buildings, $164,600; store fixtures, $72,600; and office equipment, $30,000.
  3. 3. The accumulated depreciation breakdown is as follows: buildings, $54,600; store fixtures, $37,400; and office equipment, $17,300.
  4. 4. The long term debt includes 12%, $36,000 face value bonds that mature on December 31, 2024, and have an unamortized bond discount of $1,000; 11%, $48,000 face value bonds that mature on December 31, 2025, have a premium on bonds payable of $1,800, and whose retirement is being funded by a bond sinking fund; and a 13% note payable that has a face value of $6,200 and matures on January 1, 2022.
  5. 5. The non-interest-bearing note receivable matures on June 1, 2023.
  6. 6. Inventory is listed at lower of cost or market; cost is determined on the basis of average cost.
  7. 7. The investment in affiliate is carried at cost. The company has guaranteed the interest on 12%, $50,000, 15-year bonds issued by this affiliate, Jay Company.
  8. 8. Common stock has a $10 par value per share, 10,000 shares are authorized, and 1,000 shares were issued during 2019 at a price of $13 per share, resulting in 8,000 shares issued at year-end.
  9. 9. Preferred stock has a $50 par value per share, 2,000 shares are authorized, and 140 shares were issued during 2019 at a price of $55 per share, resulting in 640 shares issued at year-end.
  10. 10. On January 15, 2020, before the December 31, 2019, balance sheet was issued, a building with a cost of $20,000 and a book value of $7,000 was totally destroyed. Insurance proceeds will amount to only $5,000.
  11. 11. Net income and dividends declared and paid during the year were $50,500 and $21,000, respectively.

Required:

1. Prepare Stone Boat’s December 31, 2019, balance sheet (including appropriate parenthetical notations).

2. Prepare a statement of shareholders’ equity for 2019. (Hint: Work back from the ending account balances.)

3. Prepare notes that itemize the balance sheet control accounts and those necessary to disclose any company accounting policies, contingent liabilities, and subsequent events.

4. Next Level Compute the debt-to-assets ratio at the cud of 2019. What is your evaluation of this ratio if it was 39% at the end of 2018?

Use the following information for P4–15 and P4–16:

McCormick & Company, Inc. is one of the world’s leading producers of spices, herbs, seasonings, condiments, and other flavorings for foods. Its products are sold to consumers, with sonic of the leading brands of spices and seasonings, as well as to industrial producers of foods. McCormick’s consolidated balance sheets for 20X2 and 20X3 follow.

Chapter 4, Problem 14P, Comprehensive: Balance Sheet, Schedules, and Notes The following is an alphabetical listing of Stone , example  2

1.

Expert Solution
Check Mark
To determine

Prepare a balance sheet for S Boat Company as of December 31, 2019.

Explanation of Solution

Balance sheet: This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity) over those resources. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and stockholders’ equity.

Prepare a balance sheet for S Boat Company as of December 31, 2019:

Intermediate Accounting: Reporting And Analysis, Chapter 4, Problem 14P , additional homework tip  1

Intermediate Accounting: Reporting And Analysis, Chapter 4, Problem 14P , additional homework tip  2

Table (1)

2

Expert Solution
Check Mark
To determine

Prepare a statement of shareholders’ equity for the year 2019.

Explanation of Solution

Statement of Stockholders’ Equity:

Statement of Stockholders’ Equity is prepared to find out the changes and ending balance of contributed capital, treasury stock, retained earnings, and other comprehensive income in the business. The amount of stockholders’ equity is increased by issuance of stock and net income of the company and decreased by the payment of dividends and repurchase of treasury stock.

Prepare a statement of shareholders’ equity for the year 2019:

Intermediate Accounting: Reporting And Analysis, Chapter 4, Problem 14P , additional homework tip  3

Table (2)

Working notes:

Determine the amount of common stock issued at par, during 2019:

Common stock issuedat par, during 2016} = Number of commonshares issued in 2016×Par value=1,000shares×$10=$10,000

Determine the amount of preference stock issued at par, during 2019:

Prefered stock issuedat par, during 2016} = Number of prefered shares issued in 2016×Par value=140shares×$50=$70,000

Determine the amount of additional paid-in common stock, during 2019:

Additional paid-in commonstock, during 2016} = [Number of commonshares issued in 2016×(Excess amount paid per share)]=[1,000shares×($13$10)]=$3,000

Determine the amount of additional paid-in preferred stock, during 2019:

Additional paid-in preferredstock, during 2016} = [Number of preferredshares issued in 2016×(Excess amount paid per share)]=[140shares×($50$55)]=$700

Note: Statement of retained earnings is prepared back from ending accounts balances.

3.

Expert Solution
Check Mark
To determine

Prepare notes that itemize the balance sheet control accounts and explain how it will helps to disclose any company accounting policies, contingent liabilities and subsequent events.

Explanation of Solution

Note 1:

Summary of significant accounting policies:

  • Inventories are recorded at market price or cost price whichever is less.
  • Straight line method is followed for depreciation of property, plant, and equipment based upon cost, estimated residual value, and useful life.

Note 2:

Guarantee to affiliate:

The company has been guaranteed by the affiliate Company J that it will be paid 12% interest on $50,000, 15-year bond.

Note 3:

Components of inventories:

The amount of inventories reported in the balance sheet is made up of the following components:

Intermediate Accounting: Reporting And Analysis, Chapter 4, Problem 14P , additional homework tip  4

Table (3)

Note 4:

Components of long-term liabilities:

The amount of long-term liabilities reported in the balance sheet is made up of the following components:

Intermediate Accounting: Reporting And Analysis, Chapter 4, Problem 14P , additional homework tip  5

Table (4)

Note 5:

Subsequent event:

On January 15, 2020, a building was totally destroyed. Its cost and book value are $20,000 and $7,000 respectively. However, insurance proceeds will amount to $5,000. This event has not been recorded in the balance sheet, as this event has been occurred after the balance sheet date.

4.

Expert Solution
Check Mark
To determine

Determine debt-to-assets ratio of S Boat Company at the end of the year 2019.

Explanation of Solution

Debt-to-assets ratio:

Debt to assets ratio provides the relationship between the total liabilities and total assets. It helps the company to determine the amount of debt used to finance the assets.

The following formula is used to calculate debt-to-assets ratio:

Debt-to-assets ratio=Total liabilitiesTotal assets

Determine debt-to-assets ratio of S Boat Company at the end of the year 2019:

Debt-to-assets ratio = Total liabilitiesTotal assets=$161,700$381,500=42.4%

Hence, the debt-to-assets ratio of S Boat Company at the end of the year 2019 is 42.4%.

Evaluation:

If the debt-to-assets ratio is 39% at the end of 2018, then it has been increased by over 3% in 2019. An increase in this ratio indicates that the investors and creditors risk is increased, because of higher payment of interest has to be made by the company. The shareholder gets benefited, if the company generates a higher return on the additional debt equity than the interest paid.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Please do not give image format
These items are taken from the financial statements of Crane Company at December 31, 2022. Buildings $133,308 Accounts receivable 15,876 Prepaid insurance 4,032 Cash 14,918 Equipment 103,824 Land 77,112 Insurance expense 983 Depreciation expense 6,678 Interest expense 3,276 Common stock 75,600 Retained earnings (January 1, 2022) 50,400 Accumulated depreciation-buildings 57,456 Accounts payable 11,970 Notes payable 117,936 Accumulated depreciation-equipment 23,587 Interest payable 4,536 Service revenue 18,522
Information for Blake Corporation’s property, plant, and equipment for 2019 is: 1. For each asset classification, prepare schedules showing depreciation and amortization expense, and accumulated depreciation and amortization that would appear on Blake’s income statement for the year ended December 31, 2019, and on the balance sheet at December 31, 2019, respectively                                                                                                       2. Prepare a schedule showing the gain or loss from disposal of assets that would appear in Blake’s income statement for the year ended December 31, 2019.                                                                                                         3. Prepare the property, plant, and equipment section of Blake’s December 31, 2019, balance sheet.

Chapter 4 Solutions

Intermediate Accounting: Reporting And Analysis

Ch. 4 - Prob. 11GICh. 4 - Prob. 12GICh. 4 - Prob. 13GICh. 4 - Prob. 14GICh. 4 - Prob. 15GICh. 4 - Prob. 16GICh. 4 - Define (a) common stock, (b) additional paid-in...Ch. 4 - Prob. 18GICh. 4 - Prob. 19GICh. 4 - What are investments by owners? Distributions to...Ch. 4 - What accounting policies are disclosed in the...Ch. 4 - Give several examples of financial instruments and...Ch. 4 - Prob. 23GICh. 4 - Prob. 24GICh. 4 - Prob. 25GICh. 4 - Prob. 26GICh. 4 - Prob. 27GICh. 4 - Prob. 28GICh. 4 - Prob. 29GICh. 4 - Prob. 30GICh. 4 - Prob. 31GICh. 4 - Prob. 32GICh. 4 - Prob. 33GICh. 4 - Prob. 34GICh. 4 - A donated fixed asset (from a governmental unit)...Ch. 4 - Prob. 2MCCh. 4 - Prob. 3MCCh. 4 - On October 2, 2020, a company borrowed cash and...Ch. 4 - Prob. 5MCCh. 4 - Rent revenue collected 1 month in advance should...Ch. 4 - Prob. 7MCCh. 4 - Prob. 8MCCh. 4 - Which of the following should be disclosed in the...Ch. 4 - Prob. 10MCCh. 4 - Prob. 1RECh. 4 - Dorothy Corporation had the following accounts in...Ch. 4 - Dorothy Corporation had the following accounts in...Ch. 4 - Based on the information in RE4-2 and RE4-3,...Ch. 4 - Prob. 5RECh. 4 - Oz Corporation has the following assets at...Ch. 4 - Prob. 7RECh. 4 - Prob. 8RECh. 4 - Scarecrow Inc. issues 50,000 shares of 2 par value...Ch. 4 - Tinman Corporation reports the following balances...Ch. 4 - Prob. 1ECh. 4 - Plant and Equipment Your analysis of Moen...Ch. 4 - GRAF CORPORATION Shareholders Equity Section of...Ch. 4 - Prob. 4ECh. 4 - Classifications on Balance Sheet The balance sheet...Ch. 4 - Balance Sheet Baggett Companys balance sheet...Ch. 4 - Prob. 7ECh. 4 - Balance Sheet Calculations Dawson Companys balance...Ch. 4 - Prob. 9ECh. 4 - Correction of Balance Sheet On December 31, 2019,...Ch. 4 - Prob. 11ECh. 4 - Prob. 12ECh. 4 - Classifications on Balance Sheet The current...Ch. 4 - Balance Sheet without Amounts The following is an...Ch. 4 - Prob. 3PCh. 4 - Prob. 4PCh. 4 - Balance Sheet Calculations Cornerstone Development...Ch. 4 - Prob. 6PCh. 4 - Complex Balance Sheet Presented below is the...Ch. 4 - Analyzing Starbuckss Balance Sheet Disclosures...Ch. 4 - Prob. 9PCh. 4 - Balance Sheet The following is a list (in random...Ch. 4 - Balance Sheet The following is an alphabetical...Ch. 4 - Balance Sheet from Adjusted Trial Balance The...Ch. 4 - Balance Sheet and Notes Listed here in random...Ch. 4 - Comprehensive: Balance Sheet, Schedules, and Notes...Ch. 4 - Use following formation for P4-15 and P4-16:...Ch. 4 - Ratios Analyses: McCormick Refer to the...Ch. 4 - Prob. 17PCh. 4 - Use the following information for P417 and P418:...Ch. 4 - Prob. 1CCh. 4 - It is the end of 2019 and you are an accountant...Ch. 4 - Prob. 3CCh. 4 - Valuation of Assets and Stock A friend has come to...Ch. 4 - It is February 16, 2020, and you are auditing...Ch. 4 - You are the accountant for Speedy Company and are...Ch. 4 - Prob. 7CCh. 4 - Prob. 8CCh. 4 - Situation You are the assistant accountant for...
Knowledge Booster
Background pattern image
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Text book image
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Text book image
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
IAS 29 Financial Reporting in Hyperinflationary Economies: Summary 2021; Author: Silvia of CPDbox;https://www.youtube.com/watch?v=55luVuTYLY8;License: Standard Youtube License